Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty:Evidence from the G7 Economies
The Friedman-Ball hypothesis implies a link between the inflation rate and inflation uncertainty. In this paper we employ a new test for the joint null hypothesis of no dependence effects and no asymmetry in the G7 inflation volatility. The results show that higher inflationrates operate additively via the conditional variance of inflation to induce greater inflation uncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found to generate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. and Canada.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993.
"On the relation between the expected value and the volatility of the nominal excess return on stocks,"
157, Federal Reserve Bank of Minneapolis.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
- Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
- Davis, George K & Kanago, Bryce E, 2000. "The Level and Uncertainty of Inflation: Results from OECD Forecasts," Economic Inquiry, Western Economic Association International, vol. 38(1), pages 58-72, January.
- Daal, Elton & Naka, Atsuyuki & Sanchez, Benito, 2005. "Re-examining inflation and inflation uncertainty in developed and emerging countries," Economics Letters, Elsevier, vol. 89(2), pages 180-186, November.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Sandy Suardi & O.T.Henry & N. Olekalns, .
"Equity Return and Short-Term Interest Rate Volatility: Level Effects and Asymmetric Dynamics,"
MRG Discussion Paper Series
0206, School of Economics, University of Queensland, Australia.
- Olan T. Henry & Nilss Olekalns & Sandy Suardi, 2005. "Equity Return and Short-Term Interest Rate Volatility : Level Effects and Asymmetric Dynamics," Department of Economics - Working Papers Series 941, The University of Melbourne.
- Eitrheim, Oyvind & Terasvirta, Timo, 1996.
"Testing the adequacy of smooth transition autoregressive models,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 59-75, September.
- Eitrheim, Øyvind & Teräsvirta, Timo, 1995. "Testing the Adequacy of Smooth Transition Autoregressive Models," SSE/EFI Working Paper Series in Economics and Finance 56, Stockholm School of Economics.
- Brenner, Robin J. & Harjes, Richard H. & Kroner, Kenneth F., 1996. "Another Look at Models of the Short-Term Interest Rate," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(01), pages 85-107, March.
- Laurence Ball, 1990.
"Why Does High Inflation Raise Inflation Uncertainty?,"
NBER Working Papers
3224, National Bureau of Economic Research, Inc.
- Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
- Grier, Kevin B. & Perry, Mark J., 1998. "On inflation and inflation uncertainty in the G7 countries," Journal of International Money and Finance, Elsevier, vol. 17(4), pages 671-689, August.
- Hwang, Y., 2001. "Relationship between inflation rate and inflation uncertainty," Economics Letters, Elsevier, vol. 73(2), pages 179-186, November.
- Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
- Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
- Olan T. Henry & Sandy Suardi, 2004. "Testing for a Level Effect in Short-Term Interest Rates," Department of Economics - Working Papers Series 924, The University of Melbourne.
- Apergis, Nicholas, 2004. "Inflation, output growth, volatility and causality: evidence from panel data and the G7 countries," Economics Letters, Elsevier, vol. 83(2), pages 185-191, May.
When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:959. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aminata Doumbia)
If references are entirely missing, you can add them using this form.